Suppose that the real money demand for the euro and US economies are given by the following equations:

Yeuro (10- 20ieuro)

YUS (5-20iUS)

Meuro = 500, 000,

MUS = 1650000

Yeuro= 62500 ,

YUS = 550,000

ieuro = 0.1 ,

iUS = 0.1

Assume that all these variables are experiencing zero growth rates. a) Calculate the current short-run and long-run Euro/US exchange rate and long run & short run interest rates

ii) Draw four graphs, that show the impact of this change. (money market graph and forex market graph

iii) Draw graphs, show the impact of this change on nominal money supply, real money supply, nominal interest rate, price level, and exchange rate. Explain what occurs to drive the shape of each figure